Taxes Blog

‘Fiscal cliff’s’ surprising winners

Remember when Congress said it wouldn't vote on major legislation, especially a tax bill, until it had plenty of time to read everything in the bill and let the voters have a look, too?

Yeah, right.

If Congress did its job properly -- hey, quit laughing! -- that might one day happen.

But as long as it puts off making hard decisions, such as how to avert the "fiscal cliff," until the last minute, we're going to keep getting laws that include a lot of things we didn't really expect.

H.R. 8, the American Taxpayer Relief Act of 2012, which finally made it into law -- it received President Barack Obama's signature Thursday via autopen, since he has returned to his native Hawaii to finish out his family holiday vacation -- is chock-full of such surprising, uh, goodies.

They are part of the extenders measure passed by the Senate Committee on Finance back in August 2012. Known as the Family and Business Tax Cut Certainty Act of 2012, the bill didn't even make it to the full Senate floor for a vote. These are popularly known as tax extenders because they are temporary tax provisions that must be periodically renewed.

The Senate version of the latest extenders included popular tax breaks such as mortgage debt relief, the state and local sales tax deduction, and the above-the-line deductions for college tuition and fees and educator out-of-pocket unreimbursed expenses. The bill renewed these and a host of other individual income tax breaks. Taxpayers now can claim them on their 2012 and 2013 tax returns.

And it also included a passel of intriguing business tax breaks, many of which are quite specific. They include:

Special depreciation treatment for the cost of racetrack improvements. This tax break, known as the NASCAR loophole, has been in extender bills since 2004. Supporters of the measure say they need the special treatment so they can compete with theme parks, a category in which the motorsports industry is included via this provision. The estimated cost of this temporary tax provision: $70 million.

A tax credit for two- or three-wheeled plug-in electric vehicles. Sounds like a kid's toy, right? But the industry obviously has a good lobbying contingent. These vehicles reportedly are quite popular among deliverymen in New York City. The rest of us outside the Big Apple will foot a $7 million bill for all that Chinese food being taken to Manhattan apartments.

Algae growers get a $59 million tax break. OK, to be fair, it's not the same as the ick growing in my backyard pond. It's grown especially to produce cellulosic biofuel. These folks want to give Willie Nelson's french-fry-oil-based biodiesel fuel a run for its money.

Film and television production operations will get a federal tax break that will allow them to more quickly write off some of their costs for making movies and TV shows in the United States. The tax break, estimated to cost $430 million overall, will provide even larger tax breaks if the productions are filmed in economically depressed parts of the country.

Special lower alcohol tax rate for rum produced in Puerto Rico and the U.S. Virgin Islands and imported to the mainland United States. This cocktail tax break is estimated to cost $22 million a year.

The cost of some of these tax breaks are, in the grand scheme of things, negligible. But that they are continually lumped into an extenders bill and in the last Congress never even faced a separate vote in either the House or Senate is a bad way to run a government.

"America's national debt is today $16.4 trillion -- $52,000 for every U.S. citizen -- placing us on the path to bankruptcy and risking our children and grandchildren's futures. In the coming weeks and months, Republicans and Democrats will need to come together and make many hard and likely unpopular decisions to get our country's long-term finances back in order. To accomplish this, we'll need the American people on our side," McCain said in a statement issued today by his office.

"That’s why it's so incredibly disappointing that Members of Congress saw fit to add hundreds of millions of dollars in special-interest handouts to the recently-passed fiscal cliff bill, which had the simple purpose of avoiding massive tax rate increases on average Americans. ... It's hard to think of anything that could feed the cynicism of the American people more than larding up must-pass emergency legislation with giveaways to special interests and campaign contributors," added the senior senator.

McCain also admitted to voting for the fiscal cliff tax bill, but doing so reluctantly in order to keep the country from economic chaos.

Unfortunately, too many other lawmakers apparently aren't bothered by these types of hidden, rushed-through votes. That's why we'll keep seeing them become law.

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4 Comments

R L Schuller

January 09, 2013 at 1:55 pm

We need to do tax reform now along with cutting entitlements and lowering corporate tax rate before we even look at raising debt ceiling. Example, we are spending 1.2 T on welfare alone to much unemployment benefits,40+% of the work force is government.People don't want to work when getting all these freebies and there are many more items I left out. This year will determine the make or breaking point.

D from Sun City

January 09, 2013 at 7:17 am

Until we put a limit on what it costs to get elected we will have to deal with all the "non common sense" FAVORS that are due the donors of the people elected.. From Obama on down, to the last
person on your city council.. They all OWE too many people !

James Boster

January 06, 2013 at 10:35 pm

None of those tax breaks seem outrageous to me. Continued production of a number of unneeded weapons for the military? Outrageous!

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